Robert J. Fedor, Esq., L.L.C.

IRS using John Doe summonses to crack down on tax evasion

Most people take steps to actively protect and preserve personal wealth and assets. Individuals are readily encouraged to establish budgets and invest assets in an attempt to be fiscally responsible and ensure assets grow and are readily available. These actions to preserve wealth often extend to tax obligations and may result in an individual hiring a tax professional or taking steps to avoid paying high taxes.

For those individuals of considerable wealth, the use of foreign bank accounts may seem like an attractive option. While having a foreign bank account alone is not illegal, failing to declare and pay taxes on income held in foreign accounts is illegal and may result in an individual facing criminal charges related to tax evasion and fraud.

In recent years, the Internal Revenue Service has aggressively pursued prosecuting wealthy individuals who may be using foreign bank accounts to hide assets and avoid paying taxes. Through the use of what's referred to as a John Doe summons, the IRS is able to obtain access to the financial records of individuals who may be utilizing offshore or foreign bank accounts for the purpose of evading taxes.

John Doe summonses are readily being used by the IRS to obtain personal identifying information of those U.S. citizens who may have bank accounts in countries from Switzerland to Hong Kong. During 2009 alone, the IRS was able to use this process to obtain the financial records of some 4,450 U.S. citizens who had Swiss bank accounts.

Individuals or small business owners who may be utilizing foreign bank accounts for the purposes of reducing tax liability or evading taxes may choose to seek legal advice. Criminal tax charges related to charges of tax evasion and tax fraud are serious in nature and may result in an individual incurring hefty fines and serving time in prison.

Source: USA Today, "Feds expand hunt for offshore tax evaders," Kevin McCoy, Nov. 12, 2013

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